Principles Of Economics, Student Value Edition
12th Edition
ISBN: 9780134079288
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: Prentice Hall
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Chapter 16, Problem 1.9P
To determine
What happens when the government imposes a per-unit tax on the firm amounting equal to the marginal damage cost.
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If production of a good is known to create external benefits
a. Those benefits are larger than those received by the consumers of that good
b. Those benefits are smaller than those received by the consumers of that good
c. Those benefits are the same as those received by the consumers of that good
A firm has a division that produces chemical Y, whose average total costs are ATC = 50 + 2Q (where Q is the quantity of Y), and a marketing division that adds its own average total costs of ATC = 20 + 3Q. There is no external market price of Y.
What should be the transfer price?
Answer all three questions:
The federal government decides to require that automobile manufacturers install new anti-pollution equipment that costs $2,000 per car.
Under what conditions can carmakers pass almost all of this cost along to car buyers?
Under what conditions can carmakers pass very little of this cost along to car buyers?
Explain your answers.
Chapter 16 Solutions
Principles Of Economics, Student Value Edition
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- (Optimal Provision of Public Goods) Using at least two individual consumers, show how the market demand curve is derived from individual demand curves (a) for a private good and (b) for a public good. Once you have derived the market demand curve in each case, introduce a market supply curve and then show the optimal level of production.arrow_forwardThe government is considering setting up a public health program to cull birds to prevent the spread of bird flu in two regions. The marginal benefit for this program in region A is QA = 90 − 3P and in region B is QB = 250 − 5P. What is the marginal social benefit curve for this program across both regions?arrow_forwardConsider a product market with three consumers X, Y and Z with demand function QX = 6 – PX, QY = 3 – ½PY and QZ = 12 – PZ respectively, where P is the price in dollars and QX, QY and QZ are the quantities demanded by Consumer X, Y and Z respectively. If the product is public good, obtain the marginal social benefit function and draw the diagram. Determine the optimal quantity of the product in the market if the marginal cost of the product is constant at (a) $4, (b) $9 and (c) $16.arrow_forward
- The market for pens in Howards is perfectly competitive with no externalities. Market demand is given by Q=165-P. Market Supply is given by Q=P-16.What is total Surplus in this market?arrow_forwardConsumption of a good creates a positive externality. Marginal costs are 0.5q + 60, marginal benefits are 100 – 1.5q and marginal social benefits are 100 – 0.5q. The subsidy required to correct this externality is equal to ________ dollars per unit.arrow_forwardSuppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound. MSB = 50 – 0.4Q; MSC = 2 + 0.4Q; MEB = 0; MEC = 0.2Q. Find the dollar value of a product charge that would achieve an efficient solution.arrow_forward
- Suppose a positive externality is associated with college enrollment. Assume that college instruction is sold in a competitive market and that the marginal social cost of providing it increases with enrollment. Show how a corrective subsidy to college students will increase the market price of instruction. Show the net gain in well-being possible from the subsidy and the amount of tax revenue required to finance its costs on your graph. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardConsider a product market with three consumers X, Y and Z with demand function PX = 6 - QX, PY = 12 - QY and PZ = 18 - QZ respectively, where P is the price in dollars and QX, QY and QZ are the quantities demanded by Consumer X, Y and Z respectively. If the product is public good, obtain the marginal social benefit function and draw the diagram. Determine the optimal quantity of the product in the market if the marginal cost of the product is constant at (a) $3, (b) $9 and (c) $21.arrow_forward
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